Company Acquisition Process
Does your business is setting up a plan to take custody on another business as part of the company’s proposal for expansion and improvement?
Do you know the whole company acquisition process and its legal issues? Learning the company acquisition process and the legitimacy of the whole procedure is very important, thus here are the complete facts about the process.
The Significance of Learning the Company Acquisition Process
Before a company can take custody or control to another business, this will undergo legal procedures for the transaction to be legitimate in nature. This process is referred as “Acquisition”. There are certain rules that differentiate the process of acquisition as defined by businessdictionary.com. The first one is taking charge on the company records. The next rule is winning ownership of assets through purchase. And the third definition, which is the common one, is having power over the target company by acquiring more than 51 percent of the voting shares.
Acquisition is distinctively different from merger, wherein the latter involves integration of two companies as a single entity. On the acquisition process, the acquired company has still control on other areas of the business and maintain as a separate entity as dictated by the acquiring company for whatever purpose it may intend. This is the reason why the acquiring company is hiring M&A consultant to perform the complex procedure of acquisition by following a complete company acquisition process.
What Comprises the Company Acquisition Process?
Once a company proposes acquisition to another firm, this follows a step-step by procedure. One of the first steps of the process is how to initiate the proposal for acquisition. In most cases, the owners or presidents of the companies involved conduct an informal discussion about the plan of acquisition. However, even if there is failure on the discussion, the plan for acquisition can be continued with the guidance of M&A advisor, of which is more familiar on the whole process of acquisition.
- Setting Up the Criteria for Acquisition
- Establishing Credibility and Integrity
- Creating the Acquisition Team that will manage on the Acquisition Process
- Adopting the Criteria for Search Opportunities
- Exchanging of information with the Target Company
- Evaluation and Initial Investigation
- Pricing and Formal Negotiation
- Closing the Transaction
This aspect is important in the sense that the company should set standards why there is a need for acquisition. There are certain questions that should be answered by the criteria like “Why there’s a need for acquisition?” and “What are the benefits of acquiring another firm that helps on the growth of the company?”
Is the company is credible enough to acquire another business? If the answer is yes then the next step is vital for the whole process.
The success of the plan for acquisition depends on the work of the acquisition team. Hiring a reputable M&A advisor can help for the achievement of the mission since he or she has all the knowledge and expertise on the said process.
Once the acquisition team is established, the next job is to utilize the acquisition criteria in searching for the target company.
Exchanging of information is being done through an agreement signed by both parties as proof that the involved parties allow sharing of confidential information. This treaty is referred as the Non-Disclosure Agreement or NDA.
Due Diligence or the process of investigating the background of the business in accordance to certain standards is vital for the evaluation process.
The acquisition team will now determine the fair market value and will negotiate it with the target company for the purchase.
Once everything is fine and both parties agreed with the flow of the transaction, then a purchase agreement will be signed formally.